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Accruals for Casino Jackpot Liabilities a consensus of the FASB Emerging Issues Task Force
The FASB Accounting Standards Codification is the source of authoritative generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. An Accounting Standards Update is not authoritative; rather, it is a document that communicates how the Accounting Standards Codification is being amended. It also provides other information to help a user of GAAP understand how and why GAAP is changing and when the changes will be effective.
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Accruals for Casino Jackpot Liabilities a consensus of the FASB Emerging Issues Task Force
Accounting Standards Update 2010-16 EntertainmentCasinos (Topic 924) Accruals for Casino Jackpot Liabilities a consensus of the FASB Emerging Issues Task Force April 2010 CONTENTS
Page Numbers Summary ...........................................................................................................12 Amendments to the FASB Accounting Standards Codification......................35 Background Information and Basis for Conclusions ..........................................67 Amendments to the XBRL Taxonomy ...................................................................8
Summary
Why Is the FASB Issuing This Accounting Standards Update (Update)?
The objective of this Update is to address diversity in practice in the accounting for casino base jackpot liabilities. Specifically, it addresses diversity in practice regarding whether an entity accrues liabilities for a base jackpot before it is won if the entity is not required to award the base jackpot. Some entities do not accrue liabilities for a base jackpot before it is won because they could avoid the payment. Other entities accrue liabilities for a base jackpot ratably over the period of play expected to precede payout.
Disclosures
The amendments in this Update do not expand the disclosures currently required by U.S. generally accepted accounting principles.
How Do the Main Provisions Differ from Current U.S. Generally Accepted Accounting Principles (GAAP) and Why Are They an Improvement?
As a result of the amendments in this Update, an entity will no longer accrue a base jackpot if the entity is able to avoid payment. This guidance will improve current GAAP by eliminating diversity in practice. The amendments in this Update apply to both base jackpots and the incremental portion of progressive
jackpots; however, the amendments are expected to only affect the accounting for base jackpots because the guidance uses the same principle that was previously applied to the incremental portion of progressive jackpots.
How Do the Provisions Compare with International Financial Reporting Standards (IFRS)?
IFRS does not provide any specific guidance on the accounting for gaming revenues.
base jackpot, for example, by removing the machine from play. In accordance with the guidance in paragraph 924-605-25-2, no liability associated with the base jackpot is recognized in such cases until the entity has the obligation to pay the base jackpot. That is the case even if the entity has no intention of removing the machine from play and expects the base jackpot to ultimately be won. 924-605-55-2 This implementation guidance addresses the application of paragraph 924-605-25-2. Some slot machines or other gaming machines include progressive jackpots. Entities in many gaming jurisdictions cannot avoid payment of the portion of the progressive jackpot that is incremental to the base jackpot because the gaming regulators consider the incremental portion of the jackpot to be funded by customers and required to be paid out (whether as a jackpot or through other means, such as a raffle). Paragraph 924-605-25-2 requires that, in such cases, the incremental portion of the jackpot be accrued as a liability at the time of funding (play) by its customers. 4. Add paragraph 924-605-65-1 and its related heading as follows: > Transition Related to Accounting Standards Update No. 2010-16, EntertainmentCasinos (Topic 924): Accruals for Casino Jackpot Liabilities 924-605-65-1 The following represents the transition and effective date information related to Accounting Standards Update No. 2010-16, EntertainmentCasinos (Topic 924): Accruals for Casino Jackpot Liabilities: a. b. The pending content that links to this paragraph shall be effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2010. An entity shall apply the pending content that links to this paragraph by recording a cumulative-effect adjustment to opening retained earnings as of the beginning of the period of adoption. The entity shall calculate the cumulative-effect adjustment as the difference between the following amounts: 1. The amounts recognized in the statement of financial position before initial application of the pending content that links to this paragraph 2. The amounts recognized in the statement of position immediately after initial application of the pending content that links to this paragraph. Earlier application is permitted. If an entity elects early application and the period of adoption is not the first reporting period of the entitys fiscal year, the entity shall apply the pending content that links to this paragraph retrospectively from the beginning of its fiscal year. An entity shall provide the disclosures in paragraphs 250-10-50-1 through 50-3 in the period that it adopts the pending content that links to this paragraph.
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924-605-00-1 The following table identifies the changes made to this Subtopic. Paragraph Number 924-605-25-2 924-605-55-1 924-605-55-2 924-605-65-1 Accounting Standards Update 2010-16 2010-16 2010-16 2010-16
The amendments in this Update were adopted by the unanimous vote of the five members of the Financial Accounting Standards Board: Robert H. Herz, Chairman Thomas J. Linsmeier Leslie F. Seidman Marc A. Siegel Lawrence W. Smith